TSB staff to be handed free shares as bank sets pay policy

The first, borrowed from the John Lewis Partnership, will be called the "TSB Award" and be a percentage of salary, up to 15pc, given to all staff based on customer service metrics. It will only be paid when the bank is profitable, and be determined on the same basis for all employees.

The second new scheme, the TSB Sustainable Performance Award, is an executive bonus scheme, which will deliver cash and shares over five years for senior management.

In a marked difference from Lloyds, TSB has said it will comply with the European Union's diktat which states that an employee's bonus must equal salary 1:1, unless approved by investors.

Lloyds shareholders backed a move by the board at its annual general meeting last month to raise that 1:1 level to 2:1.

Paul Pester, TSB's chief executive, will be paid a base salary of £700,000 a year, and receive £177,500 in pension and other benefits.

But taking into account the two new reward schemes, he will be eligible to receive a maximum of £1.68m a year.

In addition, he is due to bank up to £2.7m from legacy incentive plans and bonuses from Lloyds.

The new company-wide pay policies are being discussed with TSB's three trade unions, with plans to roll out the new arrangements for all staff next year.

"In implementing the new strategy TSB will seek to ensure that no member of staff’s anticipated overall reward is materially reduced and that the overall reward cost to the business will not be materially impacted," the bank said in a statement.

Andrea Leadsom, Economic Secretary to the Treasury, praised the announcement: “A key part of the government’s long term plan is building stronger and safer banks which deliver more competition and choice for Britain’s consumers and businesses.

"That’s why we welcome TSB’s announcement today. Its fresh approach to remuneration and the creation of partners in the business is an example of how increasing competition in the banking sector incentivises banks to come up with new ideas and create more attractive products and services, working harder to retain existing customers and attract new ones.”

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